4 months ago
19 ARTICLE AD
The recent Ethereum (ETH) paper focused on a few areas that could help builders win blocks and make money.
PhD candidate Burak Öz, deserves some accolades for successfully surprising Ethereum co-founder Vitalik Buterin with an Ethereum graph which he added to his research paper.
The said paper is titled “Who Wins Ethereum Block Building Auctions and Why?”. In the paper, Öz took a closer look into the Ethereum builder market, examining the different factors that contribute to some developers’ greater profitability and success.
Correlation Between Builders’ Market Share and Profitability
The recent Ethereum (ETH) paper focused on a few areas that could help builders win blocks and make money. Speaking of the result which was plotted on a graph, Vitalik Buterin noted that he had never seen an Ethereum graph whose y-axis uses an inverse hyperbolic sine scale before now.
For context, the analysis underpins a positive correlation between builders’ market share and profitability. It also reflects a similar trajectory on order flow diversity and exclusive providers such as integrated searchers. Builders’ capacity to draw in a variety of order flows in highly competitive market conditions, helps them to outshine their counterparts.
Additional research shows that a positive correlation between profit margin and market share exists amongst the top 10 builders. Noteworthy, market share and profitability are closely associated with factors such as exclusive signal nonatomic arbitrages and Telegram bot flow.
As a result, it is safe to say that higher profit margins are typically associated with builders who hold a larger market share.
“Our findings highlight a “chicken-and-egg” problem where builders need differentiated order flow to profit, but only receive such flow if they have a significant market share,” Öz described on X.
Here is our new paper with @sui414 and @soispoke : Who Wins Ethereum Block Building Auctions and Why?
This work was developed as part of @thelatestindefi research fellowship program funded by @UniswapFND . It will be featured in AFT '24 .
Link: https://t.co/Yb8i5C359X
Short🧵 pic.twitter.com/EPZcpLS9QV
— Burak Öz (@boez95) July 22, 2024
To put this in perspective, builders need a distinct order flow in order for them to make money. They can only get it if they already command a sizable portion of the market. It becomes more intense for those who are just coming into the market. These newcomers would need proven strategies to break into the category of elite builders.
It is worth noting that these findings are crucial to Ethereum’s future. In the near term, the builder market centralization may pose a big threat to Ethereum’s ability to withstand censorship. Therefore, Öz proposes possible ways to keep the Ethereum network resilient and more decentralized in his research paper.
Vitalik Buterin Aims for Improved Ethereum Blockchain
This Öz’s research paper which was developed as part of TL DR Research Fellowship program could impact Ethereum’s future amongst other developments.
In March, Vitalik Buterin floated an innovative proposal with the intention of enhancing the decentralization and fairness of the Ethereum staking mechanism. The target one of the proposal is the prospect for centralization among validators.
Recently, he also introduced a new development proposal EIP-7732 with the goal of improving the blockchain’s validation process and thus boosting its speed. This suggests that Vitalik Buterin is constantly on the lookout for projects that impact the Ethereum network. Little wonder Öz’s research paper caught his attention.
